Are you currently servicing a personal loan? If yes, you’re not alone! After the pandemic, nearly everyone took on debt to meet financial goals like:
- Paying for your child’s education
- Renovating your home to add a home office
- Maintaining lifestyle
- Purchasing a bigger home
But while taking debt has become a new normal, not enough people talk about debt management.
After all, multiple debts can make it difficult to keep track of monthly payments. And if you’re not careful, you can end up with a bigger debt. Luckily, this is where consolidating debts can help.
What is debt consolidation?
It is a process that involves combining all your small debts into a single loan. This helps you pay off existing high-interest debts and save money on EMIs.
Not convinced? Here are five benefits of debt consolidation you can avail of.
1. Simplify payments
If you have multiple loans or credit cards, paying all your monthly dues on time can be stressful. More often than not, it can lead to defaults in payments, affecting your credit score. In such a case, consolidating your debt can streamline your payments into a single EMI. You will no longer have to manage several deadlines, and repayment of debts will become easier.
2. Reduced interest rate
Many unsecured debts come with a higher rate of interest, adding significantly to your payments each month. By combining your credits using the new loan, you may be able to get alower personal loan interest rate than before and save money in the long run.
3. Improves credit score
Lenders make a hard inquiry whenever you apply for a new loan so you can experience a temporary drop in your credit score. However, consolidating your debt will eventually improve your credit ratings. Since it becomes easier to make timely payments, it will reflect positively on your credit report.
Similarly, paying off revolving credit lines like a credit card can help reduce your credit utilisation rate in your report. This can also help boost your credit score.
Additional Read – 5 Ways to Quickly Pay off Business Debt
4. Fixed repayment plan
If you apply for a personal loan to pay off existing debt, you can reduce your stress with a stable repayment schedule. Since you will pay only one monthly instalment, the loan repayment will become quick and comfortable.
5. Faster debt repayment
Even though taking loans is a convenient way to get the required funds, no one prefers to be in debt for too long. Since credit cards do not have a set time for paying off your balances, the payment can continue for years. Rolling all your debts with a single loan can help you become debt-free a lot sooner.
Additional Read – Debt-to-Income (DTI) Ratio: Know Why Is It Important?
To sum up
Consolidate your debts with a single loan from Tata Capital! Opt for our broad range of personal finance options and start your journey to financial freedom. Enjoy affordable interest rates, comfortable repayment tenure, and flexible EMIs for your convenience.
You can also learn about your loan liabilities using our personal loan EMI calculator. Get in touch to know more.